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2 Disappointing "Beats": Disney and U.S. Jobs

Disney's headline numbers looked good, but its biggest business came up short.

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Following a challenging day yesterday, stocks are bouncing back today, with the S&P 500 and the narrower, price-weighted Dow Jones Industrial Average(DJINDICES:^DJI) 0.55% and 0.49%, respectively, at 10:20 a.m. EST.

The October employment report, released today by the Bureau of Labor Statistics, produced a significant surprise, showing the U.S. economy adding 204,000 jobs last month compared to the median forecast in a Bloomberg survey of economists of 120,000. In addition, job gains in September and August were revised higher by an aggregate of 60,000. On the face of it, the October government shutdown doesn't appear to have hindered hiring.

However (you knew this was coming), the labor force participation rate fell 0.4 percentage point to 62.8% -- the lowest rate in more than 35 years. As such, the unemployment rate edged up 0.1 percentage point to 7.3% despite the above-expectations jobs gain.

Dow component Disney(NYSE:DIS) reported fiscal fourth-quarter results after yesterday's market close that came in ahead of Wall Street expectations. Disney shares are up 1.6% in response.

Earnings per share rose 13% to $0.77 on revenue of $11.57 billion, compared to analysts' forecast for $0.76 and $11.4 billion, respectively. Setting aside interactive, which is by far the smallest of Disney's five segments, parks and resorts and consumer products were the standouts in the quarter, with respective revenue increases of 8% and 14%. Media networks, on the other hand, disappointed by barely registering any growth at all (revenue increased 1%).

Specifically, within Disney media networks, broker Sterne Agee pointed out that cable-network revenue of $3.57 billion came in below its $3.65 billion estimate, which it said was the low estimate among Wall Street analysts.

There is no question that the media landscape and the agreement Disney just unveiled with Netflix(NASDAQ:NFLX) demonstrate the shift in power that is taking place. Under the agreement, Disney's Marvel unit will develop four live-action series based on some of its most popular characters for exclusive streaming on Netflix. As Disney CEO Robert Iger put it: "Netflix is a viable distribution platform, [that is] great for our products. It is a win-win deal for both of us." "Viable" is really the wrong term in this context; try "flourishing" instead, Mr. Iger -- you didn't do this deal out of charity.